China to expand margin trading, short selling programme

China will double the number of companies domestic investors can short-sell or buy using borrowed money. (Reuters)

SummaryChina will double the number of companies domestic investors can short-sell or buy using borrowed money.

China will double the number of companies domestic investors can short-sell or buy using borrowed money, part of efforts to let market forces play a bigger role in pricing equities.

China has allowed investors to margin trade and short a selected list of companies since 2010, but from Jan. 31, the number of eligible tickers will almost double to 500 from 280, China's two stock exchanges announced over the weekend.

"The move can better satisfy investor demand for more trading instruments, improve the pricing mechanism of shares, promote market equilibrium and is significant to healthy and stable development of capital markets," the Shenzhen Stock Exchange said on its website.

China's CSI300 of the top Shanghai and Shenzhen A-share listings rose more than 2 percent in morning trade on Monday, driven partly by expectations that the rule changes would introduce more liquidity into the market.

Currently, 74 brokerages are allowed to conduct the business, with more than 500,000 investors having opened accounts under the scheme.

The current list is mostly limited to shares in liquid, large-cap stocks, but the expansion will include smaller-cap stocks, including those traded on China's Nasdaq-style ChiNext board.